Rs75bn fuel relief plan sent to ECC as oil prices surge amid Gulf crisis

ISLAMABAD: The Petroleum Division has sent a summary to the Economic Coordination Committee (ECC) seeking approval for a Rs75 billion fuel relief package for nearly 11.8 million motorcycle, rickshaw and small-car users as soaring international oil prices threaten to deepen the economic burden on low-income households amid the ongoing Gulf crisis.
The proposed three-month scheme would provide Rs100 per litre relief on a fixed monthly fuel quota. Motorcycle and three-wheeler users would receive relief of up to Rs2,000 per month, while owners of cars with engines of up to 800cc would be eligible for up to Rs3,000 per month.
The proposal comes as global petroleum prices have registered an unprecedented increase following the latest escalation of hostilities in the Gulf.
According to the summary prepared by the Petroleum Division, petrol prices increased by Rs72 per litre, or 24 per cent, between July 1 and September 11, while high-speed diesel (HSD) became Rs87 per litre, or 28pc, more expensive during the same period.
The surge intensified on Sept 11, when the international Platts price of HSD jumped by $21.42, or 13.53pc, while gasoline prices rose by $11.13, or 8.98pc, in a single day.
With Pakistan heavily dependent on imported crude and refined petroleum products, the government said the international price shock was directly translating into higher domestic fuel prices and putting additional pressure on inflation.
The Petroleum Division said the sharp increase had created a severe economic shock, particularly for lower-income groups, while also contributing to public pressure and simmering unrest.
PM seeks targeted relief
Prime Minister Shehbaz Sharif had directed authorities to formulate a mechanism to protect the poorest segments of society from the impact of rising fuel prices.
A series of consultations were subsequently held under the leadership of the deputy prime minister, involving the ministries of finance, petroleum, IT and telecom and economic affairs, as well as the State Bank of Pakistan (SBP) and Oil and Gas Regulatory Authority (OGRA).
Following the consultations, the Petroleum Division prepared the Fuel Relief Scheme and submitted the summary to the ECC for approval and immediate rollout.
Under the proposed scheme, motorcycle and three-wheeler users would be eligible for 20 litres of subsidised fuel per month, while cars up to 800cc would qualify for 30 litres.
The government estimates that around 10 million motorcycle users, 800,000 three-wheeler users and one million small-car users could benefit from the scheme.
The estimated monthly fiscal impact is around Rs24.6 billion, taking the total cost to approximately Rs75 billion for three months.
Relief linked to users, not vehicle owners
The proposed scheme would be digitally administered through a Fuel Pass System (FPS) to be developed and managed by the Ministry of IT and Telecom.
The system would use the beneficiary’s CNIC, vehicle registration number and mobile phone number as the primary controls.
Importantly, the relief would be available to the user rather than necessarily the registered owner of the vehicle, with one vehicle allowed per user.
The government says the digital system is intended to facilitate citizens and avoid cumbersome procedures that could discourage eligible consumers from accessing the relief.
Under the proposed mechanism, petrol pumps would record the use of fuel tokens through the digital system. The IT ministry would provide daily transaction logs to the Petroleum Division, which would authorise the SBP to make payments to participating petrol stations.
OGRA would provide details of petrol pumps and put safeguards in place to prevent possible misuse by oil marketing companies, dealers or other parties.
Rs1.73bn sought for digital system
In addition to the Rs75bn required for the relief scheme, the Petroleum Division’s summary seeks Rs1.73 billion through a Technical Supplementary Grant for the Ministry of IT and Telecom.
The amount would be used to develop and operate the Fuel Pass System, including registration, token issuance, validation and settlement, as well as call centres, SMS services, third-party verification and other ancillary requirements.
The Petroleum Division has requested that the proposed scheme be approved for immediate phased rollout across the country, subject to the availability of beneficiary data.
The proposal will now require consideration and approval by the ECC, after which the government can proceed with the implementation mechanism.
The move comes as policymakers face the difficult task of shielding vulnerable consumers from the immediate impact of the oil-price shock without allowing higher fuel costs to further accelerate inflation and strain household budgets.
This framing makes the procedural status clear: Petroleum Division prepared the summary and sent it to the ECC; the Rs75bn scheme is proposed, not yet approved.